Important Considerations When Taking Out Your Next Business Insurance Policy
Taking out the right insurance is a vital way to protect your business. But deciding on the right policy can be complicated – you don’t want to pay over the odds for insurance you don’t need, but equally, it’s essential that you’re covered for the situations that could make or break for your business. Find out what to consider when choosing business insurance policies.
What are business insurance policies?
Every business needs insurance. As well as being a legal requirement for certain commercial activities, insurance protects you against the risks of running your business. For example, you might take out business insurance to guard against theft, or to pay for legal fees if you are sued.
Different business insurance policies offer varying levels of protection against different risks.
Key considerations when choosing a policy
A business insurance policy should be tailored to meet the specific and individual needs of your business and industry. We would also stress the need to review your policy’s exclusions and to get buy in from the top when cover is being arranged. Here are some of the main things to consider when choosing your business insurance:
- Risk assessment. When it comes down to it, insurance is all about relative risk. Will it be more beneficial to your business to pay out a small regular sum, or face the possibility of financial losses if you’re not covered? In many cases, paying the small sum is worthwhile, but not always – and insurers may be keen to sell you a policy that you don’t need. Make sure you’ve done your homework on the particular needs of your business, so you know which cover is important, and which is less vital.
- Value for money. Shop around before committing to a business insurance policy, as costs can vary widely from provider to provider.
- Scalability. Will you need to switch insurance providers as your business grows or your requirements change? Are you covered for changes in business practice – for example, if staff switch to working from home rather than in the office?
- Transparency. Does the insurance company explain how they have arrived at their quote? Do they take into account the size and income of your business? Always check carefully exactly what the policy covers and what’s excluded.
- Industry-specific risks. Insurance that’s specific to your particular profession can be invaluable, as it may cover issues that aren’t applicable in other industries. If you can find experts in your field, they are likely to provide the insurance that’s best tailored to your business.
COVID 19 and your business insurance policy
The COVID 19 pandemic and subsequent Government controls have hugely impacted many businesses causing substantial losses. Claims are being made to insurers under the terms of business interruption (BI). These insurance policies are typically used to cover financial losses to a business due to the interruption of an unforeseen event. In some cases, the policy will extend to specific diseases which will be listed in the cover.
The high-profile example of Wimbledon and its famous tennis tournament which has been saved from financial ruin for 2020 is thanks to AELTC paying pandemic insurance covering the annual championships for the past 17 years. The premium costs around £1.5m a year but following the event’s cancellation due to Covid-19, AELTC is predicted to receive a £114m pay out, as reported by Insurance Times in April.
Reviewing exactly what your next policy can offer in terms of protection against a situation like the COVID 19 pandemic should be a high priority.
What type of insurance does my business need?
However, certain sectors including; legal, finance and health are required to have professional indemnity insurance for their solicitors, accountants and some healthcare professionals in order to operate. This effectively means that those insurances will be mandatory for those professions.
We have discussed that some types of business insurance are required by law, while others are optional. There’s an array of different options, including:
Public liability insurance
If your business activity involves any kind of interaction with the public, a public liability insurance policy is a must. Public liability insurance will protect you if you are sued by a member of the public – for example, if a customer trips and injures themselves on your premises.
Professional Indemnity Insurance
Professional indemnity insurance is mandatory for members of many professional bodies, in industries such as accountancy and architecture. It’s highly recommended in other fields, protecting you against claims of professional negligence. If your work involves offering advice or providing professional services – perhaps as a designer, IT contractor or tutoring, it’s wise to look at professional indemnity insurance policies that will cover you if you make a mistake.
Employers’ liability insurance
Employers’ liability insurance is a legal requirement for most companies employing staff in Great Britain, under the Employers’ Liability (Compulsory Insurance) Act 1969. It covers claims made against you by employees if working for you has caused an injury or illness.
Company directors and officer’s insurance
Company directors and officer’s insurance provides financial protection against any claims made personally against a director, partner or officer of a business. These claims could include; negligence, breach of duty, defamation and more.
Business buildings insurance
Business buildings insurance ‘does what it says on the tin’ – it covers your commercial properties against things like theft, fire, accidental damage and other events that could be harmful to your business. If you rent your business properties, it’s your landlord’s responsibility to take out this insurance.
Business contents insurance
Many companies use expensive equipment or store large quantities of cash on their premises. Even if you don’t house anything especially valuable, the cost of replacing the contents of your buildings in case of theft or damage could be significant – so contents insurance is important to protect against this.
Business stock includes tools, equipment and merchandise – the items that are essential to keep your business running. Stock insurance can cover either the recommended retail value of your items, or their cost price. It’s worth getting clarity on this when taking out your policy, as it could significantly affect the value of your payout.
Product liability insurance
If you sell or give away any kind of physical product, you could be held liable if it causes damage or injury. For example, the maker of a faulty electrical item could be sued if their product started a fire. Product liability insurance can cover you against this type of claim.
Personal accident insurance
While employers’ liability insurance covers your costs in the case of accidents your employees may have at work, personal accident insurance goes one step further. It can pay for extra benefits to employees affected (or their families, if they die doing their job). It’s not a legal requirement, but it is a responsible way to ensure that your staff are taken care of.
Business interruption insurance
Nobody can predict when a disaster might stop your business from operating as normal. A fire or flood on your premises could interrupt your income stream, because you are unable to provide your usual goods or services. It’s this loss of income that business interruption insurance is designed to protect against.
Business legal protection insurance
As a business, it’s possible that you may face legal costs for a variety of reasons, from employment tribunals to HMRC tax investigations. The costs incurred can run into thousands of pounds – enough to ruin many smaller businesses, even if they are not at fault. As such, business legal protection insurance policies are a sensible way to cover the cost of potential legal bills, as well as ensuring you can access expert legal advice and protection, should you need it.
Get expert advice on business insurance policies
At Bridgehouse, acting as your company secretary, we can help you navigate and liaise with industry experts, who can advise your company on the right insurance policy for your business. Contact us for more information.